Wed. Jun 19th, 2024

Protecting the U.S. Postal Service from Amazon’s Anticompetitive Assault

February 22, 2022


Abstract: While Amazon ostensibly advocates for postal reform, it has engaged in two types of anticompetitive conduct that threaten the U.S. Postal Service’s (USPS) solvency and evidence a desire to extend and perpetuate its dominance over e-commerce.

First, Amazon has lobbied to combine mail and parcel delivery under one cost center, thus obscuring the latter’s contribution to institutional costs and allowing Amazon to conceal the uneconomic pricing it receives from USPS in the form of special discounts from the standard parcel rates, putting upward pricing pressure on the standard rates for parcels and letters, and placing taxpayers at risk of having to bail out the popular agency.

Original empirical evidence suggests that Amazon’s lucrative negotiated service agreement with the USPS has prompted the latter to attempt to recover any losses on the Amazon deal by raising prices to other customers.

Second, Amazon has established a network of distribution facilities in primarily urban locations, leaving USPS to serve the high-cost, largely rural areas—a “cream-skimming” strategy that exploits the Postal Service’s universal service mandate.

Further, Amazon’s staunch anti-labor positions and its exploitation of USPS should raise concerns about its motivation for lobbying in favor of Medicare integration. While the transition of postal workers to Medicare and/or postal employee health benefit plan has drawn bipartisan support, the scope of the change remains opaque and its impact on Medicare warrants further analysis.

The paper concludes with concrete policy proposals that address and mitigate Amazon’s anticompetitive conduct. In particular, we propose (1) restrictions on special discounts off USPS’s standard parcel rates granted to large shippers that do not reflect legitimate cost savings to USPS; and (2) to maintain any special discount from USPS, a large shipper would be unable to use the USPS for last-mile service on routes USPS deems unprofitable unless fully offset with more lucrative routes in congested areas.

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